Pricing of tobacco products during, and after, the introduction of standardized packaging: an observational study of retail price data from independent and convenience (small) retailers in the United Kingdom

Abstract

Background and aims Tobacco companies claimed that standardized packaging, phased in/introduced May 2016–May 2017, would reduce prices and increase consumption. We: (1) describe changes in price‐per‐cigarette and price‐per‐gram during, and after, the introduction of standardized packaging; (2) describe price changes by cigarette price segment; and (3) analyse price changes by stage of implementation. Design An observational study, using electronic point‐of‐sale data, monitored price trends in three periods: (1) May–September 2016, start of transition period; (2) October 2016–May 2017, when fully branded and standardized products were sold and duty escalators implemented; and (3) June–October 2017, when standardized packaging was mandatory. Setting United Kingdom. Participants Small retailers (n = 500) stratified by region and deprivation. Data were monitored for 20 leading fully branded tobacco products [15 factory‐made cigarettes (FMC), 5 roll‐your‐own (RYO)] and their standardized equivalents. Measurement Price‐per‐cigarette and price‐per‐gram, based on monthly average Recommended Retail Price (RRP) and actual sale price, adjusted for inflation using the Consumer Pricing Index (CPIH). Net changes (£GBP, %) were analysed by product type (FMC versus RYO) and FMC price segment (value, mid‐price, premium). Findings Between May 2016 and October 2017, the average inflation‐adjusted RRP/price‐per‐cigarette and price‐per‐gram increased for FMC (all price segments) and RYO. For example, sales price‐per‐cigarette increased +4.64%, with the largest increases for value (+6.81%), premium (+5.32%) and mid‐price FMCs (+3.30%). Net sales price‐per‐cigarette and price‐per‐gram increases were largest in period 2, when fully branded and standardized products were sold and duty escalators were implemented (FMC = +4.70%; RYO = +3.75%). There were small decreases in sales price‐per‐cigarette and price‐per‐gram once standardized packaging became mandatory (FMC = –1.14%; RYO = –0.88%). Conclusion In the United Kingdom, the price of leading roll‐your‐own and factory‐made cigarette brands sold by small retailers increased as standardized packaging was phased in, with increases larger than expected through duty escalation.

Standardised packaging, minimum excise tax, and RYO focussed tax rise implications for UK tobacco pricing

“…It seems important that standardised packaging is introduced in the context of a regime of tax increases [57,58] because the tobacco industry in the UK was able to hold down prices post standardised packaging of most products until faced with a tax rise. Nevertheless, the UK experience shows that standardised packaging can be implemented without tobacco prices falling long-term.…”

“…However, there were a number of differences between the UK and Australian legislation and the sales data available to Australian researchers was limited [19]. In the UK, the current evidence suggests that prices rose during the year long implementation period (May 2015 to May 2016) and then fell afterwards [58,59]. Breton et al [59] analysed UK Nielsen data between March 2013 and June 2017, only a month after full implementation.…”

“…Breton et al [59] analysed UK Nielsen data between March 2013 and June 2017, only a month after full implementation. Critchlow et al's analysis of UK convenience store sales data [58] had a longer follow up period (until October 2017) but did not include the post full implementation Box 1. Tobacco taxes in the UK Tobacco is taxed in the UK as follows (see also Table 1): specific (ad quantum) taxes (a tax on quantity) are applied as a fixed amount of tax payable on each unit sold and therefore narrow the percentage price difference between cheap and expensive products.…”

Using point-of-sale data to examine tobacco pricing across neighbourhoods in Scotland

“…The prices at which tobacco brands are sold by retailers in the UK, including Scotland, can vary by store. While tobacco companies emphasise the importance of the recommended retail price (RRP), individual retailers can increase sales prices above the RRP to increase profit margins or lower prices to attract price sensitive customers 27. In response, this study explores neighbourhood-level variation in the purchase price of tobacco products in Scotland, both cigarettes and roll your own tobacco.…”

“…While tobacco companies emphasise the importance of the recommended retail price (RRP), individual retailers can increase sales prices above the RRP to increase profit margins or lower prices to attract price sensitive customers. 27 In response, this study explores neighbourhood-level variation in the purchase price of tobacco products in Scotland, both cigarettes and roll your own tobacco. In a novel approach, we have gathered a point-of-sale dataset that captures all tobacco sales over a 1 week period across 274 individual stores in Scotland.…”